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Section 7491(a) places the burden of proof on respondent
with regard to certain factual issues. Section 7491 applies to
examinations commencing after July 22, 1998. Restructuring and
Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112
Stat. 726. Upon reviewing the record, it is unclear when the
examination of petitioner’s 1997 return commenced. Further,
neither party raised the issue of whether section 7491(a) applies
here. However, under section 7491(a)(2)(B), the burden of proof
does not shift to respondent where the taxpayer has not
cooperated with reasonable requests by the Secretary for
information or documents. Respondent sent letters to
petitioner’s counsel on January 16, February 6, and February 8,
2001, asking petitioner to present documents which would
substantiate the disallowed deductions. Respondent also made
phone calls on January 26 and 30, 2001, to petitioner’s counsel.
One phone call, the only communication between the parties prior
to trial, was returned. At trial, petitioner offered into
evidence documents to substantiate some of her claimed Schedule C
deductions which had not been presented to respondent prior to
trial. Because we find that petitioner failed to cooperate with
respondent prior to trial, section 7491(a) does not apply in this
case.
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving the entitlement to any
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